The Real Numbers Behind a New Build Duplex in Indy (It Might Surprise You)

Welcome back to another episode of the Roots podcast. I'm Max Moore joined by my co-host Tyler Lingal. Today it's a Boys Only. It's just me and Ty. We're going to dig in deep into his new group duplex deal. He literally is looking at the numbers right now. I don't know if he's ever ran them. They've been, you know, building this thing for 6 months. That's the one thing I love about Tyler. He just goes and does it because he sees the mission. Sometimes that's why you have to buy is because you can see the mission, you have the vision, and you want the asset. Uh me though, numbers guy, I'm very curious and I kind of want to dissect what it actually looks like to to buy one of these, you know, nice fancy shiny 400 plus thousand properties uh in Indian if they actually work. So, uh how much are you buying it for? What's the actual purchase price? Mine is on the upper end of the spectrum. So, this was like a more quoteunquote premium lot. Um so, 475,000, but they start at 400K. 475. I will say Tyler's is in one of the top top. There's one that's betteration. There's It's number two. It's the best lot I've seen. Uh there's one in Herren Morton. It's number two. Okay, that might beat it. But this is a really good lot. It is a very good lot. We're in Brookside. It's like by North Mass Boulder and it's Smurf Blue. Uh right around the the corner of Brookside A. You can't you literally can't miss it cuz it's where it heads up. Um and it's ginormous compared to everything around it. Such a good buy. 475. Uh how much down? 25%. 25% down. So 125, but I I converted my commission into a credit. So I did have that advantage. Not everyone would have that, but so it was about 120ish down. Let's just call it 120k into the deal to buy a duplex with. Uh it comes with some sort of warranty. 10-year builder warranty. Um so your uh systems inside the house are covered. Basically had to tow outside of drywall, your foundation's covered. Yeah. Okay. roof. Um, I need to read the fine print on the warranty. I I'm assuming furnace and like water heater, that type of stuff. I don't believe it's um Yeah, like outside like sewer line probably not roof probably not. It's usually like systems like appliances usually are covered by that. Yeah, I'll have to read some more fine print there. irregard the whole purpose of buying this property is because you don't have the maintenance expense and you don't have as much capital expenditure overheads like when plugging into a spreadsheet or analyzing if it's a good deal that is your upside. Um, okay. So, we're 120k down. Principal interest payment roughly. Yeah, I just pulled that up. Roughly, our principal and interest payment is 2,300. Not bad. Uh, dang. 2,300. The power of that down payment. Principal and interest. Yeah, the down payment is heavy. 25% down. You got to keep that in mind. Um, okay. So, and that's with uh Oh, that's 6. 75%. Okay. Just probably what I can get right now. Um 7% it' be a little higher but yeah we're using a commercial lender. So do you have taxes in there and insurance? That's not included. So on top of that uh taxes will be reassessed but um we have taxes and insurance essential will be another 460. Okay. So we're we're roughly going to round out about like 2800 a monthish. That's where we'll be including like if it was escroed the full PITI payment 2,800 is fairly safe. Nice. Okay. And some change maybe. But yeah, 2,800. These are three bed twobath units. Stainless steel appliances. The upstairs have this like cathedral. We'll pop some video up that I I have raw footage from whenever I went and did a walk through. Um vaulted ceilings is what you were saying. Yeah, they're just they're really nice. So the upstairs rents for more because of that. Yeah, I would if I was picking it and house sacking it, I'd be on that upstairs unit. Uh side note, because we do so much with New Group, we have a guy, shout out Carlos, hope you're watching this. Uh he is doing a MTR on the bottom unit and able to pull in close to three grand while living in the top. So his numbers here, if you're at 2,800, 25% down, Carlos is probably like he was VA loan, he's probably over threeish. His purchase price is a little bit lower, but like that MTR is almost paying that entire mortgage. Yeah, that's wild. Which is crazy. Zero bucks. Yeah. So, let's talk about how much you're going to cash flow. It doesn't look like it's going to be something to write home about. Mm- uh by any means, but we're thinking top unit can rent for So, we're underwriting this um at 2,000 a month each side for our location. Yeah, I think it's fair. Yeah, I think you hit it. Yeah. I mean, if we're at 1,800, I don't think we'll lose our shirt. So, we're kind of I'm saying, 1750 on the bottom unit. I'm saying 2,200 on the top. Whoa. I don't know if the differential between the bottom and top is that high. Uh, yeah, probably not. I'm being wild. I think they might be $100 different. Okay. So, 21,00 whatever the numbers will get there. So, looking at uh we'll call it on a bad day you end up with 3,800 in rent, 2,800 in interest. That's,000 bucks a month in cash flow to Dude, that's that's great. doesn't include, of course, your maintenance and your manager. Yeah, manager at 10%. We've already talked about this. Brand new, warrantied, right? Your maintenance first few years will be pretty negligible, right? Right. Um, you know, what do you think this could sell for? Very curious if you listed it tomorrow. Yeah. Um, I've had people inquired uh about buying it. Um, so I floated out 550 to them. They didn't actually write an offer there, so I'm not going to act like they had serious discussions about it. Uh, if I sold it tomorrow, it'd be above 500. 550, maybe not, but it'd be above 500. I'm very confident on that. The equity gains wild uh fresh off the shelf. I don't think that's on all of them. However, there's a strategic thing that you can do with New Group. You can go buy the lot and build the building. So, you can go identify a lot. I know a couple that are sitting off Central A right now that uh you could go pick up and build two of these on because the unique thing about New Group is since they're top down, they can build on 40 foot frontage where no other builder no other builder can scale like they are. That's why Ed New is crazy. We're going to have them on my lot, I believe, is only 30 ft wide. Yeah. Oh, yeah. No, I'm sorry. You can do 30 ft. They're trying to do they're trying to do 40 with a different different layout. Um, and we're going to have him on and learn like where all this came from cuz it's it is a need for this city. There is a wild uh we need these types of units. It's good for renters and uh investors both. Yeah. For stability, for the amount of house act market, it's going to be huge. Yeah. It's going to be with owner occupants buying these. So, essentially what we're looking at here is you likely will probably I'm just talking real. You're probably end up putting like two to 300 bucks in your back pocket. It's average out over like holding it for I'm not buying my groceries with the cash flow. That was not the plan here. Right. But forward looking where I'm thinking you're going to end up being able to roll equity that was from a quad originally. Yep. This is property number two. Yep. In a much better location with better tenants. Mhm. Presumably. Mhm. That's the whole play. But if you wanted to and wanted to flirt with the idea, dude, I I think in two years you could sell this and go buy two. Well, yeah. Yeah. Let me break that down. I think the way we originally were like, we'll buy this quad and own it for 30 years, pay down the mortgage, and Indie is going to be so amazing by then. Uh, and the reality is things change, right? You get into it a few years and it's like there's different options. You feel differently about the property and the operation of it since the quad was a nasty uh operation that did we didn't enjoy going to the property or dealing with the issues was labeled cash cow originally, right? That was the like the cash on cash was it was a difficult property to manage with tenants that were oftentimes in poor situations. That's why they were renting a cheaper quad on the near east side. Right. So this is $2,000. Uh it's a more lifestyle based investment and it's an appreciation play. Like I'm just going to just call it for what it is. Oh Tyler, it's $475. How's it going to appreciate? It's going to appreciate. Yeah, it already Windsor Park has properties selling probably now above a million but above 6 or 700 single family homes. These duplexes, I think the play honestly for us to hit on it directly is we just want to cover our costs and and be net positive in cash flow from we won't be net positive every single month. I know that, but on the year we want to be net positive in cash flow. We want to hold it for approximately five years. At that point, Windsor Park will have more than enough critical mass to it having appreciated six figures, right? Uh probably 200ish thousand is is our estimate at that point. I think that's realistic. Like a $600,000 plus uh play five to maybe seven years, you know. I don't know. I don't how aggressive we can look, but I don't know. 247 I feel like seems quite likely, right? And at that point the options are okay, do we want to uh cash out refi because maybe our rents will support take that buy another property just peel off another property or do we want to sell it? Who knows? Maybe they'll be building eight plexes and forplexes new group or whoever build one of those, right? It's just the options. Or we say screw it, life got busy. we had more we had kids and uh we just want to ride this home to the dust and we just let that equity sit in a piggy bank and then it's there for our grandkids. It's what I'm hitting at right is it's options. So there's three there's three options I just uh laid out. Refinance, sell and uh 1031 or just conversion. That's what Mark Ningham calls it. Conversion of the equity or let the equity sit in a piggy bank and work to pay it down, right? and allow the appreciation to ride up. So effectively what happened here and I think this is a really cool story to encapsulate Tyler's journey as an investor. We took a quadplex that was quite a headache. Yeah, that served a purpose. It it did increase quite a bit in equity over the life cycle uh leveraging partnership rolling it into an asset asset that will uh presumably be headachefree. I'm coining. Yeah, he might still have some headaches over he probably already has headaches over it and like just the process in general of getting it off the ground to have and buy the flexibility and feasibility to options. And I think that is what New Group does is unlocks that door for uh a very solid base hit. Yep. That can evolve into a home run. Well, right. And a couple things to add. one. Um, and I'm not trying to toot on horn, but we haven't talked about what I'm in this for. Uh, I actually bought that first property. The equity I did put in the deal was actually just like Bitcoin I bought in college as a joke. I'm actually in it for it feels like nothing. I'm in it for like all of this for 13,000 or something like that. So, there's that. If you if you do leverage creative partnerships, we talk about that all the time. But then two is who are these ideal for, right? And it's not 20-year-old Tyler with no money, uh, not a barely a shirt on his back. It's these are for one, people who are rolling equity from crappy investments. That's what we said. I had this crappy quad or like, hey, I had a few single family homes. I'm just annoyed with them. The furnaces all break at the same time and the roofs need repaired and it's three furnaces, three roofs conversion. Do the conversion, right? Or it's like, hey, I've invested in uh with my uh with my uh financial planner, I've done these real estate deals passively and I'm just sick of it. I have no control over them. Hey, do a new development. And this is a pretty scripted process. They've been pumping these out. It's not like you're going to be creating something from scratch, but hiring an architect, identifying land. They have the land. They've already hired the architect. All you got to do is just sign the papers and they'll build it, right? So it's for someone who's cash heavy that has a portfolio of other types of assets that wants to have more direct ownership of right the five wealth creators of real estate. Yeah. Right. Which I could name but you know you get them you know there's the inflation hedging as well and the conversion and all that. Yeah. And I think that uh right now our city is primed for that style of investment. I almost would go as far as to say if you're not going and buying a turnkey asset and you're wanting to add value elsewhere. I think it's like you buy something like New Group or you invest with a mule here that can go and carry it, which is what your partner did. He invested with you, right, in the crummy crummy quad to then roll to to New Group. So, correct. Uh I hope this ages well and that you get to exit in a few years for 600 plus. Um hopefully New Group will be uh staying strong. I know we've hit on them pretty they're they're a sponsor of us. they sponsor our events and this uh not this podcast yet, but you know, could be a sponsor of us, but they're a business like any other and that's a hard business, too. So, we hope that you know they'll be around. If not, there's always going to be new development opportunities and it's our job to identify those. Yeah. Right. Have an agent that brings you valuable opportunities. Don't have someone that's just like a gatekeeper that you feel like you have to they have to be the one to execute the contract, but they don't provide any value. Yeah. Fire hire them. Hire us. Right. And if you're anywhere around the country, we have agent partners around the country. We identify investor agents all across the country and we can connect you to one. I love that. Uh we'll see you at our next master class August 8th. Gman House. Sign up below.